European stock markets closed higher on Wednesday, recovering after a sharp bond selloff in the previous session had rattled investor sentiment. Traders assessed fiscal challenges but welcomed signs of stability in bond markets.
The pan-European STOXX 600 index rose 0.65% to 546.72 points, supported by gains in healthcare stocks such as Roche and AstraZeneca. Basic resources also advanced 1.5%, lifted by stronger copper prices and growing expectations of a U.S. interest rate cut later this month.
The rebound followed Tuesday’s steep drop, the index’s worst daily loss in a month. That selloff was triggered by a surge in long-term bond yields amid concerns over fiscal pressures across advanced economies.
In France, the 30-year government bond yield eased about five basis points to 4.4547% after hitting a 16-year high the day before. However, political uncertainty weighed as Prime Minister Francois Bayrou faces a no-confidence vote next week. A loss could topple his minority coalition and intensify fiscal instability.
German and Italian long-dated bond yields also cooled after spiking on Tuesday. Rabobank economist Teeuwe Mevissen said the move was a “small correction,” warning that risks remain despite stabilization.
Stock movers
Adidas jumped 4.8% after Jefferies upgraded the stock to “buy” and J.P. Morgan placed it on a positive catalyst watch. This helped lift the STOXX 600 retail sub-index by 1.5%.
Genmab surged 5.1% after new trial results showed its cancer drug Epcoritamab can be used in outpatient treatment for relapsed or refractory lymphoma.
On the downside, Swiss Life fell 1.2% after reporting lower first-half net profit due to higher taxes. Insurance stocks slipped 0.5% on the day and are down 2.5% this week, pressured by the bond market selloff. Lufthansa also dipped 0.4% after its pilots’ union announced a strike over pensions.
Economic backdrop
A private survey showed the eurozone economy grew slightly in August. Stronger manufacturing output helped offset weaker services activity. In Germany, services contracted again after a brief expansion in July as new business demand declined.
In the U.S., weaker-than-expected job openings data added to speculation of a Federal Reserve rate cut in September. Investors are now focused on Friday’s nonfarm payrolls report for further policy clues.
